The Internal Revenue Service initially keeps any incomplete or incorrect tax paperwork. It uses the documents to perform an audit and allows the filer to fix the mistakes through additional paperwork. The amount of time the IRS keeps the tax records depends on exactly what is wrong with the forms, but after the statute of limitations has run out and additional taxes, credits or refunds cannot be assigned, it disposes of the records according to formal organizational procedures.

Amending a Return

When a return contains a mistake — such as missing a Social Security Numbers, missing signatures or failing to attach forms like W2s — a filer typically has the chance to correct the error by filing an amended return. To do this, he has to use the Amended U.S. Individual Tax Return form, better known as the 1040X. This document applies to the 1040, 1040A, 1040EZ, 1040NR and 1040NR-EZ. Although a person can grab the 1040X right off the IRS website, it can’t be filed electronically and has to be sent to the filer’s IRS service center.

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If a taxpayer owes more money to the government, he usually has three years from the date he sent his original return to file this form. This rule also applies if a person is requesting a credit or refund, but in this case, he also may file for up to two years after he paid the taxes, whichever comes later. Regardless of when he sends it out, he has to include copies of any related forms that show what changed. If he was expecting to get a refund back and the amended return shows that the IRS actually owes him more, he has to wait until the first refund arrives before he can claim a second one.

The Statute of Limitations

The statute of limitations refers not only to the period of time when a person no longer can file an amended return, but also to the point at which the IRS cannot charge more taxes. Most cases use a statute of three years, but sometimes this can extend to six years; the extended deadline usually applies when someone understates his income by 25% or more. It is also an option when an audit finds problems related to previous years.

If the IRS suspects fraud or a person simply never files a return, the statute of limitations never runs out and records are kept indefinitely. In the first scenario, the documents might be useful in a legal case against the filer, so the government won’t dispose of them. Ending the statute of limitations in the second situation might prevent the IRS from getting money to which it is entitled, so the government keeps the right to audit and ask questions for that year.

Sometimes, the IRS will request an extension on the statute of limitations, because the agency occasionally becomes backlogged and has trouble getting a standard review done within the usual three-year window. It’s typically best for a taxpayer to say yes to the request, because it gives more time for a thorough examination of the records. A person who doesn’t want to extend the statute can refuse, however, or they can put some restrictions on what the IRS looks at.

Penalties, Fines and Prosecution

The IRS has the right to assign additional charges or penalties when a person files incomplete or incorrect tax paperwork, but it usually only does so when the mistake leaves the individual owing money. The agency sends the filer a request for payment, along with comments about the amendments on the return that were necessary. If someone submits incorrect tax paperwork that is fraudulent on purpose, he might be subject not only to fees and penalties, but also to criminal prosecution. The IRS keeps the records on file as a way of proving that the individual still needs to pay or should be brought to court.

Records Disposal

When the statute of limitations has passed, the IRS doesn’t have much need for the incorrect or incomplete tax paperwork, and it starts the process to get rid of the records. Representatives look to the Archivist of the United States as the sole authority for disposal and have to follow guidelines detailed in the Records Control Schedule. Once an agent has approval to remove the records from wherever they are stored, he may erase, burn, pulp, macerate or shred the documents.

Discuss this Article

anon931139Post 11

I recently moved and transferred from NY to an Ohio branch of my employer, but it took my employer over a whole year to confirm my change in address and my W2 now says I worked in both states and I'm being charged for NY taxes, even though I only worked in Ohio for the entirety of last year. Is there anything I can do so I'm not charged for NY taxes?

anon354653Post 10

Recently I received letter from the IRS regarding my 2011 tax year. That year I received a refund. Now, two years later, they say they reviewed the tax return and I owe them $750+. Why did it take two years to do the review and now they say I owe them?

anon335427Post 9

What could I do if I gave the wrong year I ended school? They sent me a letter asking for proof I still lived with my mom and other things, so I sent them copies of my mail address and since I forgot the day I ended school, I had to guess, since I didn't go for long. So now they didn't give my sis her money and for my mother she only got 100 from the 4,000.

anon328638Post 8

I accidentally write down my zip code in my address, in the f8843. I realized it minutes after I delivered to the post office. I had my right zip code on the envelope. Do I have to notify the IRS?

anon309153Post 7

I received a letter from the IRS stating they need more information about how I came up with the dollar amount for employment related expenses on Schedule A. What do I send them - receipts? An itemized list of everything I purchased? The numbers have not dramatically changed over the last several years so I'm a little concerned about the request. Thanks for any feedback.

reedcharPost 6

How can a person find out from the IRS if they were used as someone's dependent, but they did not know about it?

anon257508Post 5

Is it illegal for a company to not inform you that they did not file a w-2 form with the IRS on you? I received a letter from the IRS and when I called them, they informed that they never got a w-2 from my employer, so it shows I withheld too much on my tax return.

anon252853Post 4

This is my dilemma that I have been thinking about for just a couple of days.

I am working in a company that doesn't issue a W-2/1099 since they are a tax exempt foreign-government company, though they issue a Letter of Income supporting the salary that I make yearly. When I first filed my taxes while working with this company in 2007, I filed jointly with my ex-husband who happened to have his own business and since I do not have either a W-2 or a 1099, the tax accountant used a Self Employment schedule for me.

In 2009, I got divorced and my new tax accountant copied the same approach from my previous tax returns. Just recently, I realized

that I could have been using a 1040EZ form instead of filing a 1040 form with those business related-schedules that my accountant is attaching.

As I computed my tax, I should have paid less than half of my tax dues from the past two years with a form 1040EZ. So far, I'm not sure if what the IRS will do if I will start using the correct form. Your column gave me an idea but I am not sure if my case may fall under the common errors stated above. - Myles

This has happened to me several times, and usually it has been an honest mistake that caused me to have to pay more tax. One year, I didn't file a form SE when self-employed and I owed them about $60. Another year, I took the child deduction for a child who turned 17 during the year (but you can only take it if they are under 17 for the whole year).

The IRS did not send the boogie man after me. They sent a letter saying I owed a certain amount of additional tax. They were right. I paid, and they never bothered me, and no, they didn't start auditing me after that.

WGwriterPost 2

Hi anon11381

We have an article coming out on this topic in a couple of days: What Can I Do If I Inadvertently Made a Tax Mistake When I Filed? Look for it. Basically though, you can amend your return by filing a 1040X. You can download form and instructions from the IRS website.

If you realize you included a deduction in your return you should not have which will reduce your refund, then what action should you take? Will the IRS pick up this mistake, thus meaning you should wait to hear from IRS instead of filing an amended return?

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